Vietnam’s Ministry of Finance has announced plans to reduce tax burdens for foreign-invested enterprises that engage in expansion projects for existing investments.
The ministry will be making changes to the Law on Corporate Income Tax, to be revised by the National Assembly this year, according to Dezan Shira & Associates.
In December 2012, Prime Minister Nguyen Tan Dung told the Government Consultative Group that the country needed to compete with other Asian regional economies, and specifically China. Plans have been made to reduce Vietnam’s corporate income tax from the current rate of 25 percent – the same as China’s corporate income tax rate – to 23 percent.
Additionally, foreign-invested enterprises wishing to expand their operations in the country can apply for tax relief to 10 percent corporate income tax at new factories.
According to Dezan Shira & Associates, this proposed regulation has already been given a trial run by extending this tax incentive to Samsung Electronics, who has wanted to increase operations in the country and have applied to increase their registered capital amount from US$670 million – an investment that attracts a 25 percent rate on profits – to US$1.5 billion, with the latter investment attracting the lower 10 percent rate.
The Minister of Planning & Investment, Bui Quang Vinh, has stated that 2013 will bring positive changes to Vietnam’s investment and business climate due to the National Assembly’s expected adoption of a series of business-related laws, including revisions of the Investment Law, Corporate Income Tax Law, and Land Law.
The government has specifically targeted foreign investment as a priority in terms of attracting more investment capital, infrastructure projects, and factory operations into the country.
Vietnam’s foreign investment capital reached about US$15 billion (utilised: US$11 billion) in 2012, and similar figures are expected for 2013.
The regional influence that ASEAN and its free trade agreements will provide from 2015 are acting as an incentive for many Asian countries to examine their tax policies in the face of increasing competition for investment dollars.